Prepayment meters, a type of domestic energy meter that requires users to pay for energy before using it, have been forcibly installed as customers struggle to meet the rising cost of energy. Vulnerable households have not been spared, as exposed by undercover reporting from The Times.
Among cost of living pressures, those on the lowest incomes have been paying the most for energy, and aren’t able to spread the cost of keeping warm this winter.
This article looks at what prepayment meters (‘PPM’) are, who they are affecting, and how.
Payment up front
A recent Welsh Government statement says approximately 200,000 Welsh households use PPM for mains gas and electricity, representing:
… approximately 15% of all households and 24% of tenants in the private rented sector. Almost half of social housing tenants (45%) also use pre-payment meters.
Energy has historically been more expensive with a PPM, and customers have more limited credit options as they are unable to go into arrears. Under the Energy Price Guarantee (a temporary measure introduced by the UK Government to reduce energy prices in response to the rising price cap) PPM customers pay a lower unit price for electricity than other customers. But they pay a higher unit price for gas than customers paying by direct debit, and pay higher standing charges than all other customers for both electricity and gas.
However, Chancellor Jeremy Hunt’s recent budget aims to end the PPM “premium”, by bringing PPM rates in line with those paying by direct debit. PPM customers should save an average of £45 per year.
Citizens Advice Cymru saw more people unable to afford to top up their PPM in 2022, “than for the whole of the previous 10 years combined”. It also found over 70% of Welsh PPM users are worried about keeping their PPM topped up, and that:
32% of PPM users in Wales have been disconnected from their energy supply over the last year because they can’t afford to top-up.
Affecting the most vulnerable
Almost half of Welsh social housing tenants have a PPM. Research by the Resolution Foundation shows those on PPM are disproportionately on the lowest incomes. Barnardo’s Cymru says this perpetuates a “very real” poverty tax, and that younger households are up to four times more likely to be on a PPM.
Disability Rights UK explains that many disabled people use more energy due to essential medical and independent living equipment in their homes, and are therefore “terrified” of having a PPM. Whilst energy suppliers must take a disability into account when dealing with a customer, PPM were shown to have been force-fitted in disabled people’s homes.
According to Age UK, one in four PPM households include someone aged over 60. The charity reports that vulnerable older people are ‘self-disconnecting’ out of desperation – this is where a PPM customer does not have enough money to top-up their meter, or when they do not realise that credit on the meter is running out, and it cuts out.
‘Appalling’ number of forced-installations
Energy firms can apply to a magistrate for a warrant to force customers on to a PPM without agreement if they have racked up debts.
The then UK Secretary of State for Business, Energy and Industrial Strategy, Grant Shapps MP, wrote to energy suppliers in January, calling on them to stop forcibly installing PPM without taking every step to support consumers in difficulty. Ofgem set out its intentions to conduct a further Market Compliance Review (MCR) focused on suppliers’ practices on PPM.
It was reported that 32,790 warrants were issued in January to forcibly install PPM. Ofgem asked suppliers to pause forcible installation and to conduct a thorough review of processes. Magistrates have since been ordered to stop issuing warrants for this practice in England and Wales.
Ofgem has also called on all suppliers to use the pause in installations to review all of their recent forced and remotely switched PPM installations. They have been asked to consider if any need to be reversed, and compensation offered where the strict rules have not been followed.
The ban on forced PPM installations was to come to an end on 31 March, but will now be lifted “only if and when” firms follow Ofgem guidance.
Following a meeting with energy suppliers in January 2023, the Minister for Social Justice, Jane Hutt MS said energy suppliers had agreed to share data on the number of households being supported with their energy bills and/or being transferred onto PPM, and the reason for doing so.
She also said the Welsh Government has consistently called on the UK Government and Ofgem to introduce a social tariff to protect the most vulnerable householders and there was broad support for this from energy suppliers. The Minister said she was “appalled” about the number of forced PPM installations.
This issue will now be scrutinised by the Senedd’s Petitions Committee, which is due to undertake an inquiry into what the petitioner describes as the PPM ‘scandal’ in Wales.
Article by Lorna Scurlock, Senedd Research, Welsh Parliament
